Kurt's Thoughts

I thought that the one or two of you that are actually reading this would find this internal dialogue here at Microsoft interesting.  This by the way is obviously not a recommendation… it’s just a stuff I’ve read.

The other day, someone in the company (on one of our many internal discussion/mailing lists) asked the question, “Who’s converting their 401k to cash?”  A legitimate question for people concerned about their future savings.  No one wants to be left penniless in their retirement.

When do you want out?
One person chimed in that the big question revolves around when that money matures and when the person is looking to need that money.  If it’s in the immediate future, well, there might be something to think about there but if it’s in the next 10 years or more, this is more than likely a buying opportunity being that he had confidence that the markets would recover during that period of time at which point he’d then need the money.  Timing the market is a scary thing unless you’re willing to put a huge amount of time figuring things out… and even then it’s just and educated guess.

Your funds are already hedging
Someone else chimed in and said that funds are all hedging right now anyway.  A person’s change of making a difference short term, in a way that could actually be measured 20 years from now is slim to none.  The only thing you can do at this point is pick a good fund and stick with it because they’re already hedging.

It’s a good time to buy
One person said that his financial advisor also said, like everyone else’s, that now is the time to buy.  Getting out of the market i.e. cashing out is a move to avoid according to his financial planner because you’re probably getting out at a much lower period than what will be available in the future.

Don’t listen to soothsayers
Now one of our ‘think tank’ folks strongly came down on the idea of “financial wizards” or forecasters being that soothsayers don’t exist.  Most of them have massive losses and/or are barely escaping bankruptcy.  He recommends asset allocation by using money going in that increases what you are trying to generate interest on.  He also mentions a technique known as the barbell approach.  Simply put:  “…the good investment strategy is to put 90% of your money in the safest possible government securities and the remaining 10% in a large number of high-risk ventures. This insulates you from bad black swans and exposes you to the possibility of good ones. Your smallest investment could go “convex” – explode – and make you rich.”

In his own words: 

“Driving what I do is, yes, loss aversion– if I am 100% richer  I am not 100% happier but if I am 50% poorer I am very very unhappy.  Money needed to pay for things promised to people I love is not money I seek high risk growth on.  

The enemy of performance is trading and the fees it generates and fee generally. The other enemy of performance is chasing performance. Stocks could go up tomorrow or down. In the long term stocks will go up at a reasonable pace. Will I buy new stocks soon? Unlikely. Not buying more stocks is not the same as moving to cash by paying a commission.

I told you what I do with my money.  It is not intended as financial advice.  If you want financial advice read Buffett, Lynch, Munger, Swensen (of Yale), etc.”

More financial perspective from the Maverick Blogger
Someone else said that Mark Cuban apparently wrote an article about investing and diversification.
http://blogmaverick.com/2008/09/08/talking-stocks-and-money/

Personally, I have to admit that Mark Cuban’s posts are very interesting.